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Wednesday, May 6, 2015

A month ago,
the government raised the price of 500-odd essential drugs by 3.84
percent. Is it a fair rise, and does it ultimately benefit the consumer?
Is controlling the prices of all drugs sold in India – which the
government is considering – a good plan? A manufacturer of low-cost
drugs explains.

By S Srinivasan | Grist Media – Mon 4 May, 2015

A month ago, the
government announced that the price of some 500 essential drugs would
rise. How are drug prices fixed in India, and is the latest rise of 3.84
percent a good or a bad thing? Does a Parliamentary panel’s recent
recommendation that all drugs in India be brought under price control
make sense? Here are some answers to questions about drug prices in
India.

Who controls the price of medicinal drugs in India?
The National Pharmaceutical Pricing Authority (NPPA) does. It is a regulatory agency under the Department of Pharmaceuticals that implements and enforces the Drug Price Control Order (DPCO) – the most recent order was introduced in May 2013.
The DPCO sets the maximum price of essential drugs sold in India. The
drugs under price control cannot be sold beyond the ceiling price (plus
taxes).

Which drugs have their prices controlled?
All 348 drugs of fixed strengths (such as 500mg or4mg, for example)
and their approximately 620 presentations (tablets, tonics, capsules,
etc) mentioned in the National List of Essential Medicines (NLEM) 2011
are under price control as per the DPCO of 2013.
This means that if a necessary, and frequently used (but highly
priced) medicine is not mentioned in the NLEM 2011, then the medicine
will not be under price control. For example, atorvastatin 10mg, used to
lower cholesterol, is under price control but not its 20mg variant, as
the latter is not mentioned in the NLEM 2011. Nor are other statins like
rosuvastatin or simvastatin under price control, as they do not find
mention in the essential medicine list. Or, to take another example,
only 500mg tablets of paracetamol are mentioned in the NLEM – not other
strengths. In the absence of a pro-rata formula for strength and price, a
1000mg tablet of paracetamol, for instance, will escape the price
control net. Almost all pediatric strengths are not mentioned in the
NLEM 2011, and are therefore also out of price control.
Hopefully, the proposed revision of the NLEM 2011 in 2015 will take these problems into account. A fortnight ago, a report by the Standing Committee on Chemicals and Fertilizers that was tabled in Parliament said that
all drugs should be brought under price control:“[T]he scope of price
control needs to be enlarged to make all the drugs available, especially
life saving drugs, in all parts of the country.” This seems
unnecessary, as India has too many drugs (around at least 1,00,000
brands) to control, and a waste of the NPPA’s energy – particularly when
some of the drugs not on the NLEM are irrational and unscientific (more
on this below). While these non-essential and irrational drugs should
be weeded out of the market, all essential and life-saving drugs in all
their recommended strengths and presentations, even if not on the NLEM,
should be under price control.

How is the ceiling price for medicines decided on?
Drug pricing in India has a long, tortured history. Major milestones
in controlling pricing came in 1978, 1986, 1995 and the latest in May
2013. Before May 2013 the ceiling prices of the formulations of only 74
bulk drugs that were under price control were fixed based on a
‘cost-plus’ formula. This was the sum of the cost of the bulk drug to
make one unit, plus the cost of conversion (from, say, powder into a
tablet), and the margin that the manufacturer was to be allowed – it was
a fairly commonsensical formula.

Since May 2013, the ceiling price
has been a market-based one, taking the simple average of the price of a
drug sold by brands that have at least 1 percent share of the market.
For example, if there are 100 brands selling of 500mg tablets of
paracetamol in the market, but only about 15 brands have a market share
of over 1 percent, the ceiling is fixed by adding up the price of the
500mg paracetamol sold by those 15 brands, and dividing it by 15.

If the price of the drug that brands are selling is high to begin
with, the ceiling price will also be high. This formula has no direct
relation to the cost of production or the cost of raw material (and in
my opinion, it is nonsense). Take atorvastatin 10mg, the
cholesterol-lowering agent – leading brands were selling it at around Rs
100 for 10 tablets before the 2013 DPCO. After price control, this has
been brought down to about Rs 60, but even that is highly overpriced. At
LOCOST – a non-profit manufacturer of low-cost drugs – where I work, we
market it at about Rs 9 for 10 tablets, while our actual cost of
production is Rs 3.50. The market-based ceiling price formula is an
irrational method. It ends up justifying high prices (and high profits)
with no relation to the cost of production.

Are there provisions for increase in ceiling prices?
An increase is allowed in April every year, as per the increase in
wholesale price index (WPI) for the previous 12 months. This is to
account for inflation and increase in cost of inputs. The WPI increase
for 2014-15 was 3.84 percent, so this year, with
effect from April 1, 2015, the price of 509 NLEM medicines has been
increased by 3.84 percent. A similar WPI-linked increase will be carried
out every year in April.
Meanwhile, the DPCO of 2013 allows the price of non-essential drugs to be increased by 10 percentevery year!

Is the 3.84 percent rise in the price of essential drugs fair?

The biggest problem with this sanctioned rise is that it does
not take into account the percentage rise in the cost of raw material –
which often can be more than the percentage increase in WPI. The
ceiling price cannot remain static in this way – frozen at 2013 prices
with an annual rise that is too low to keep up with rising prices.

The problem is partly because
under the 2013 DPCO, the government does not control the price of active
pharmaceutical ingredients (API) or bulk drugs, which are used to make
tablets, capsules and other formulations. Nor is the formula for ceiling
price linked to the price of the API. In the last 12 months, for
instance, the price of folic acid, which is essential for pregnant women
as part of iron folic acid tablets, went up from Rs 5,000 a kg to Rs
25,000 a kg. That’s a 500 percent rise, compared to the allowed rise of
3.84 percent. Luckily, in this case an iron plus folic acid tablet
requires only micrograms (mcg) of folic acid, so manufacturers can
manage with this price rise, for now. But for the manufacturers of other
drugs (such as doxycycline and norflaxacin), the extraordinary increase
in prices has made it almost unviable, even for low-cost manufacturers
such as ourselves. (Incidentally, since folic acid and ferrous sulphate
are mentioned separately in the NLEM 2011, the standard prescribed
combination of ferrous-sulphate-plus-folic-acid tablet is out of price
control!)

The DPCO 2013 does provide for abnormal increases in input costs, but
the procedure is inadequate and comes with a time lag, if at all. We
need a procedure guaranteed to make useful drugs available, so that
there is no scarcity at any time because the cost of manufacturing of a
drug makes it unviable.

But isn’t it a good thing that prices of essential drugs are kept low? Doesn’t it ultimately benefit the consumer?

While some manufacturers may be
able to offset the losses they make to manufacture an essential drug by
cross-subsidizing it with a non-essential drug, if it is economically
unviable even for not-for-profit manufacturers like us, it means bad
news.

Whatever price a drug was being
sold at in May 2013, it has to be frozen there according to the 2013
DPCO. Even if I, as a manufacturer, have been selling it at much below
the ceiling price, I don’t have the freedom to adjust the price
according to the increase in the cost of raw material. Drugs on the 1995
list such as co-trimoxazole (brand name Bactrim), the already mentioned
norfloxacin and doxycycline, have been frozen at that price, to the
point that it is uneconomical to continue making them. The ceiling price
is so that you can just about make it at cost price, or at a loss.

The cost may be low for the
consumer for now, but if it drives manufacturers out of business, who
will then produce essential drugs? The consumer is ultimately hit. Price
control isn’t a bad thing – but the methodology of it has to be fair,
based on input costs plus a margin.

How large is the essential drugs market?
The (allopathic/modern medicine) market of medicines sold domestically
is around Rs 85,000-90,000 crore. A government affidavit filed in the
Supreme Court in November 2013 indicated that only 18 percent of the
domestic market is under price control. That means about 82 percent of
the market is out of price control. Subsequently the figure of 18
percent has become even less
as the essential drugs market has not kept pace with the total market
growth. (Medicines from other systems of medicine such as Homeopathy and
Ayurveda are not under price control.)

Are drugs that are not on the essential medicines list (NLEM
2011) unnecessary? How come they were approved for manufacture in the
first place?
There are many useful, scientific and lifesaving drugs (such as
montelukast for asthma) not mentioned on the NLEM 2011 that ought to be
on it. But yes, in terms of their market share, the majority of the
drugs not in the NLEM are indeed non-essential.
Pharmaceutical companies have been given licence to manufacture and
market non-essential drugs because of non-application of mind by the
state and central drug regulating authorities. And now they are in the
market, they are proving to be a legal nightmare to weed them out –
again because of lack of bureaucratic, political scientific will to
clean up the pharma market.
Non-essential drugs include irrational and unscientific combinations
of drugs (such as combinations of painkillers or combinations of
antibiotics) as well as popular vitamin and “nutritional” supplements.
Most iron tonics for pregnant women such as Dexorange are unscientific
and a burden on the consumer – all those that do not contain ferrous
sulphate and folic acid in the required strengths are a financial waste
and areconsidered sub-therapeutic. (A majority
of Indian women have anemia, or iron deficiency.) Indeed, iron and
folic acid tablets in the right strengths are generally not available in
the retail market! Two of the top-selling cough medicines in the market
are of doubtful rationality (there is no clear support for it in
respected pharmacological literature). As are fixed-dose combinations of
the antidiabetics involving metformin and other drugs. Combiflam, for
instance – a combination of ibuprofen and paracetamol – can cause harm –
you end up taking two drugs when you need only one. The NLEM document
states: “Preference is given to single drug formulations as opposed to
fixed dose combinations where appropriate. Hence use of NLEM is expected
to improve prescribing practices as well as the health outcomes. The
appropriate use of medicines selected in the NLEM promotes rational use
of medicines. Such rational use of medicines, especially antimicrobial
drugs, reduces development of drug resistance.”

How about drugs of the same therapeutic or chemical class as those on the NLEM 2011? Are they under price regulation?
Drugs of the same therapeutic or chemical class are not under price
control. As mentioned above, all statins are not under price control as
only atorvastatin 10mg is mentioned in NLEM 2011. Neither are all ACE (angiotensin-converting-enzyme)
inhibitors used for cardiac problems – only enalapril 5mg and 2.5mg
tablets and an injection are mentioned on the NLEM list, and neither
ramipril nor lisinopril find a place (both prescribed frequently by
doctors). In crucial areas like diabetes, which affects Indians
disproportionately to people of other ethnicities, the NLEM 2011
originally mentioned – apart from insulins – only two drugs: metformin
and glibenclamide. All the other useful and essential antidiabetics like
glimepiride (brand nameAmaryl) were not mentioned – something the NPPA
tried to remedy in July 2014 using special powers mentioned under
Paragraph 19 of the 2013 DPCO, which allows the government, in case of
extraordinary circumstances and for public interest, to fix the ceiling
or retail price of a drug as it sees fit.
The pharmaceutical industry – both Indian companies as well as MNCs –
promptly went to court questioning the inclusion of many life-saving
drugs not on the NLEM 2011 under price-controlled drugs. But for a
change, the pricing authority was doing the right thing. The case is
still in the courts – but the central government’s legal counsel (in a
classic case of the left hand contradicting the right hand) opined –
wrongly, according to many of us –against the future use of Para 19 for
such purposes! The industry lobbies won this round. A clear case of industry not working for the country’s public health – if proof was needed.

How do India’s neighbors in the developing world control drug pricing? Are there good models to emulate?
Bangladesh has an excellent model for fixing drug prices that
protects the interests of both consumers and manufacturers. The cost of
drugs is fixed according to different categories of drugs, but takes
into account the cost of raw and packing material, production overheads
and profit, distribution costs and retailers’ commission to arrive at a
drug’s MRP before VAT. And the price is increased every year
commensurate to the annual inflation rate. The formula for a tablet
would be: if Re 1 is the cost of the raw material in a 500 mg tablet,
the ceiling price would be Rs 2.25 – that is 2.25 times the cost of the
raw material.
Even though vested interests have succeeded in diluting
Bangladesh’s price control policy, the country has held on since 1982 –
despite pressure from foreign MNC lobbies and their governments.

S
Srinivasan (“Chinu”) works for Low Cost Standard Therapeutics (LOCOST)
and is associated with All-India Drug Action Network (AIDAN) and Medico
Friend Circle (MFC). He writes frequently on public health aspects of
access to medicine and is a petitioner in related PILs in the Supreme
Court.

Friday, September 23, 2011

They sit together on the porch, the darkAlmost fallen, the house behind them dark.Their supper done with, they have washed and driedThe dishes–only two plates now, two glasses,Two knives, two forks, two spoons–small work for two.She sits with her hands folded in her lap,At rest. He smokes his pipe. They do not speak,And when they speak at last it is to sayWhat each one knows the other knows. They haveOne mind between them, now, that finallyFor all its knowing will not exactly knowWhich one goes first through the dark doorway, biddingGoodnight, and which sits on a while alone.